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One common foreclosure-avoidance method struggling homeowners have taken advantage of is the short sale. In short sales, homeowners sell their homes for less than they owe on their mortgage loans. Mortgage-lender permission is required for a short sale to take place, and lenders must approve short-sale purchase offers before those sales can close.

Conducting Short Sales

Mortgage lenders generally dislike allowing borrowers to conduct short sales because lenders take a loss if those short sales succeed. However, mortgage lenders dislike foreclosures even more than short sales, so borrowers meeting lender short-sale guidelines may be allowed to conduct them. When a homeowner conducts a short sale, the home being sold will be listed at a discounted price. For a short sale to attract prospective buyers, the price of the home being sold must be attractive.

Purchase Offer Consideration

Experienced short-sale investors know they need to put together comprehensive short-sale purchase offers for lenders to consider. The major reason that lenders closely consider short-sale purchase offers submitted to them is that they're trying to limit their losses. In fact, mortgage lenders sometimes take weeks or months to consider short-sale purchase offers on their properties. Generally, a short-sale purchase offer must net the mortgage lender more than it would make from a foreclosure.

Buyer Purchase Offers

A mortgage lender considering a short-sale purchase offer will first need to be convinced its borrower is facing financial hardship. An effective short-sale purchase offer always supplies sufficient evidence that the short seller is struggling financially. Additionally, mortgage lenders looking at short-sale purchase offers from buyers want to know those buyers can close quickly after short-sale approval. Short-sale buyers must include proof of their ability to close quickly once their offers are approved.

Identifying Key Departments

Mortgage lenders may treat short sales negligently, moving them around different departments. Short-sale purchase offers submitted to mortgage lenders may travel from their foreclosure departments to their loss mitigation departments, for example. While mortgage lenders are shuffling short-sale offers from department to department, sellers and their buyers lose time and patience. One way to get a short sale approved is to identify the department responsible for approving it and then working closely with that department.

Streamlined Short Sales

Homeowners with mortgages owned by Fannie Mae or Freddie Mac or from more than 100 other participating lenders may be eligible for streamlined short sales. Under the Home Affordable Foreclosure Alternatives (HAFA) Program, certain mortgage servicers have agreed to speed up the short-sale process. Eligible homeowners are even offered certain financial concessions after the short sale. HAFA runs through Dec. 31, 2012, with the program accepting applications up until that date.

About the Author

Tony Guerra served more than 20 years in the U.S. Navy. He also spent seven years as an airline operations manager. Guerra is a former realtor, real-estate salesperson, associate broker and real-estate education instructor. He holds a master's degree in management and a bachelor's degree in interdisciplinary studies.

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Guerra, Tony. "How Do Lenders Look at a Short Sale for Purchases?" Home Guides | SF Gate, http://homeguides.sfgate.com/lenders-look-short-sale-purchases-53736.html. Accessed 25 May 2019.

Guerra, Tony. (n.d.). How Do Lenders Look at a Short Sale for Purchases? Home Guides | SF Gate. Retrieved from http://homeguides.sfgate.com/lenders-look-short-sale-purchases-53736.html

Guerra, Tony. "How Do Lenders Look at a Short Sale for Purchases?" accessed May 25, 2019. http://homeguides.sfgate.com/lenders-look-short-sale-purchases-53736.html

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